I don't really think a cncconversion can make up for calculation errors since YOU will have to tell it exactly what it should be doing ,meaning offcourse that if the values are (way)off on a cnc machine it will even cut into itself while when operating manually leaves chance to correct any problems.
Thats why i don't think a cnc-retro can not replace the use of a DRO in your case.
As for making up for slop(backlash) in the handles : CNC and BACKLAsH are a bad combo though software can compensate for this ,it is very limited and can not get rid of too much "slop".though i have not experienced this myself maybe some1 else can jump in.I need say there are many imho good ways to get rid of slop even on a budget ,so this shouldn't stop you.
i guess i'm trying to warn that even after completing a cnc-conversion there is still alot of calculating concerned with cutting and i think it's even more critical here since a machine can't compensate for error in the last minute.Though with limitswitches and creating g-codes with "ready2go" programs should rule out most critical error.
I'm sure i didn't cover all concerns but i'm sure there is some1 willing to add to this.
whatever you decide : GOOD LUCK.